AUSTIN, Texas – Texas credit unions can expect the elimination of the sales tax currently levied on transactions at Texas Credit Union Service Centers, according to Carol Keeton Strayhorn, Texas Comptroller of Public Accounts. Previously, service center transactions were considered taxable as data processing by the comptroller's office. The unexpected announcement was one of three good news items Strayhorn communicated to approximately 250 attendees on the opening day of the Texas Governmental Affairs Conference, hosted by the Texas Credit Union League Feb. 3-5. Strayhorn also said she is committed to no franchise tax for credit unions. In addition, Strayhorn said her agency is reviewing the possibility of granting credit unions "some relief from switching fees for ATM transactions", noting that credit unions would pass on the savings to their members. These good news items were welcomed by participants who heard no stone will be left unturned by the 78th Legislature in trying to reduce expenses and generate additional revenue to address a budget shortfall over the next biennium. Strayhorn projected the shortfall at $9.9 billion, with $1.8 billion needed just to finish up the current fiscal year, which ends Aug. 31. The shortfall is the result of a decline in sales tax and property tax revenues for the state along with "state spending which has skyrocketed," according to Strayhorn. Strayhorn emphasized that "state government must live within its means," and that she "will not have a deficit on [her] watch," but said, "I am adamantly opposed to higher taxes or a state income tax." State agencies have already been told to cut their budgets by 7%. Other state legislators, Representatives Jose Menendez (D) and Rene Oliveira (D), speaking to the audience suggested that Strayhorn's figures did not take into account factors such as new programs and estimated the shortfall more realistically at $12-$15 billion. Long-time credit union supporter Rep. Oliveira called Texas Governor Rick Perry's promise of no new taxes "irresponsible" and said with the difficult task at hand of balancing the budget, legislators and the public need to be open to all potential means of revenue. Rep. Menendez (D) didn't mince words about the state's financial condition. "Doom and gloom is justified. We're broke. We will all feel the cuts, severe and deep." He said he was offended at the disparity between the Comptroller's original estimated budget shortfall of $5 billion in the fall 2002 and her almost doubled current estimate. He suggested that November elections delayed Strayhorn's announcement of the higher figure. State Representative Dan Flynn (R) told GAC attendees that Texas' current budget of $114 billion "ought to be enough to run the state," but that the House would be looking at things "differently" to streamline expenses. Rep. Flynn encouraged credit union leaders saying that with only 150 members of the House of Representatives, 225 million Texans can make a difference. "Government is run by those who show up, and credit unions made the first step today." Rep. Burt Solomons (R) said balancing the budget would be particularly difficult because of the strong desire by many legislators and citizens to see reform of the state's school finance program. "Most of us in the House campaigned on doing something under Robin Hood (the program's nickname which describes funds taken from the more affluent school districts and distributed to the less affluent). I don't want to go home without reform." GAC attendees also heard from Rep. Kenny Marchant (R) and State Senators Kip Averitt (R) and John Carona (R). Although most of the talk at the GAC concerned the state's budget, other legislative issues facing Texas' credit unions were also discussed. Ann Graham, TCUL's General Counsel, outlined the League's key issues during this legislative session, which began Jan. 14 and ends June 2, as: home equity reform, credit union department modernization, adequate credit union department funding, a minor revision to the state's collateral protection insurance, and promotion of the credit union strength and difference. Gary Davis, chairman of TCUL's Force Fund and president/CEO of Chocolate Bayou Community FCU, said the GAC was "the best we've ever had," in terms of level of participation and timing. Timing was key, Davis said, because Texas has 44 freshman legislators who need to be educated about credit union issues. "Response from legislators was more positive than any we've ever had, especially in light of the difficult session in front of us," Davis said. "Credit union leaders are more comfortable with their involvement in the political process, and therefore more effective. My greatest fear is that we leave the Conference thinking our work is done. We've got to keep pushing issues to the forefront and get them resolved." In one GAC session, Davis said a show of hands determined "slightly more than 50 percent" of the credit unions in attendance were federally chartered. "Why would they care what's happening on the state level," Davis asked. "Because if regulatory or legal issues are not covered in the Federal Credit Union Act, state laws can impact them. What happens on the state level is important to all of us." -

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